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Flashcards in Definitions Deck (59)
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1
Q

Gross National Product

A
  • Value of all the goods and services produced in an economy, plus the value of the goods and services imported, less the goods and services exported
  • measures the income of an economy, the quantity of goods and services the economy can afford to purchase
2
Q

Micro economics

A

Detailed treatment of individual decisions about particular commodities

3
Q

Macroeconomics

A

Is the study of the economy as a system

Interactions in the economy as a whole

4
Q

Aggregate supply

A

Is aggregate supply itself and aggregate supply function

Aggregate supply itself - productive capacity available in the economy to produce goods and services

Aggregate supply function - schedule detailing the national products that would be supplied at each general price level

5
Q

Aggregate demand

A

Aggregate demand itself and aggregate demand function

Aggregate demand itself - total sum of nominal expenditures on goods and services in the economy

Aggregate demand function - schedule detailing the quantity of national product that would be purchased at each general price level

6
Q

Inflation rate

A

Is the percentage increase in the average price of goods and services

7
Q

Economic growth

A

The growth rate of real GDP ( or real output) over a determine period of time (e.g. Annual, quarterly etc)

8
Q

Circular flow

A

Shows how real resources and financial payments flow between firms and households

9
Q

Fiscal policy

A

Government policy on spending and taxes with the purpose of stabilising the economy ( keep output close to potential output)

Made by treasury in gov

10
Q

Fiscal stance

A

Shows the effect of fiscal policy on demand and output

11
Q

Expansionary fiscal policy aims to…

A

Raise national income

12
Q

Contractive fiscal policy aims to…

A

Reduce national income

13
Q

Monetary policy

A

Concerns money supply. Controlled by the central bank.

Affects C and I by altering interest rates.

14
Q

Money supply

A

Currency in circulation outside the baking system plus deposits of commercial banks and building societies

(Value of the stock of the medium of exchange in circulation)

15
Q

Open market operation

A

Occurs when central bank alters the monetary base by buying or selling financial securities in the open market

16
Q

Real GDP

A

At constant prices

17
Q

Nominal GNP

A

At current prices

18
Q

Gross Domestic Product

A
  • monetary value of economic activity in a period of time
  • market value of all the final goods and services produced within a country in a given period of time
  • total value of an economies domestic output of goods and services
19
Q

Money

A

Any generally accepted means of payment for delivery of goods or settlement of debt

20
Q

Money as a store

A

Money is a store of value because it can be used to make future purchases

21
Q

Bank reserves

A

Money available in the bank to meet possible withdrawals by depositors

22
Q

Reserve ratio

A

Ratio of reserves to deposits

23
Q

Commercial banks

A

Financial intermediaries licensed to make loans and issue deposits, including deposits against which cheques can be written

24
Q

Monetary Base

A

Quantity of notes and coin in private circulation plus the quantity held by the banking system

25
Q

Money multiplier

A

Is the ratio of the money stock to the monetary base

26
Q

Cost of holding money

A

Is the interest given up by holding money rather than bonds

27
Q

Transactions Motive

A

The transactions motive for holding money reflects the fact that payments and receipts are not synchronised

28
Q

Asset motive

A

The asset motive for holding money reflects dislike of risk. People sacrifice a high average rate of return to obtain a portfolio with a lower but safer rate of return

29
Q

Required reserve ratio

A

Minimum ratio of cash reserves to deposits that banks are required to hold

30
Q

Demand management

A

Uses monetary and fiscal policy to stabilise output near potential output

31
Q

Inflation

A

Is a persistent increase in the general price level of goods and services in an economy over a period of time

( represented by pie in macroeconomics)

32
Q

Potential output

A

All inputs fully employed

33
Q

Real money supply

A

M/P

34
Q

Leakage from circular flow…

A

Is money no longer recycled from households to firms

35
Q

Injection to circular flow

A

Is money that flows to firms without being cycled through households

36
Q

Nominal exchange rate

A

Price of foreign currency in this market

37
Q

Real exchange rate

A

The relative price of foreign goods in terms of domestic goods

It depends on the nominal exchange rate, the domestic price level and the foreign price level

38
Q

Stock of money

A

A given quantity of money in the economy

39
Q

Flow of money

A

Money used to carry out transactions per unit of time

40
Q

Unemployment

A

Those who are available for work at the current wage rate, but are without a job

41
Q

Labour force

A

Those employed plus those unemployed

42
Q

Rate of inflation

A

Measures the annual percentage increase in prices

43
Q

Hyper inflation

A

Means high inflation. Often defined as 50% per month.

44
Q

Stagflation

A

High inflation in periods of high unemployment

45
Q

Comparative Advantage

A

A country has a comparative advantage in producing a good if the opportunity cost of producing that good in terms of other goods is lower in that country that it is in other countries

46
Q

Opportunity cost

A

The number of a determined good that could have been produced with the resources used to produce another good

47
Q

Domestic supply (DS) (international)

A

Production of commodity Q supplied by a country over a determined period of time (month, year etc)

48
Q

Foreign supply (FS) (international)

A

Production of commodity Q supplied by a foreign country over a determined period of time

49
Q

Domestic demand (DD) (international)

A

Quantity of good Q demanded by consumers in a country over a determined period of time

50
Q

Foreign demand (FD) ( international )

A

Quantity of good Q demanded by consumers in a foreign country over a determined period of time

51
Q

Domestic equilibrium in Autarky (international)

A

Quantities of domestic demand and domestic supply that are stable under the internal or domestic price of commodity Q

52
Q

Domestic equilibrium in an open economy (international)

A

Quantities of domestic demand and domestic supply that are stable under the external price of commodity Q

53
Q

Autarky

A

Closed economy - countries do not trade

54
Q

Domestic support policies

A

Instruments used to favour a sector in the economy e.g CAP

55
Q

Specific tariffs

A

Are levied as a fixed charge for each unit of good imported

56
Q

Ad valorem tariffs

A

Taxes that are levied as a fraction of the value of the imported goods

57
Q

Export subsidies

A

Payment to a firm or individual that ships a good abroad

58
Q

Balance of payment

A

Records transactions of exports/imports and financial assets

59
Q

Uncovered interest parity condition

A

States that the return from investing in the domestic and the foreign assets market must be the same